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Macerich (MAC) Q3 FFO Lags Estimates, Guidance Reaffirmed

Retail REIT The Macerich CompanyMAC came up with third-quarter 2017 funds from operations (FFO) per share of 96 cents, lagging the Zacks Consensus Estimate of 98 cents. The prior-year quarter’s FFO per share was $1.04. The quarter witnessed improvement in same-center net operating income (NOI).

The company posted revenues of $242.5 million for the quarter, surpassing theZacks Consensus Estimate of $227.5million. However, revenues came in 4.3% lower than the prior-year quarter figure.

Note: All EPS numbers presented in this write up represent funds from operations (FFO) per share.

As of Sep 30, 2017, mall portfolio occupancy contracted 100 basis points (bps) year over year to 94.3%. Mall tenant annual sales increased to $659 per square feet from $626 at the end of third-quarter 2016. Re-leasing spreads increased 15% on a year-over-year basis. Also, same-centers net operating income grew around 3.1% from the prior-year comparable period.

As of Sep 30, 2017, Macerich’s cash and cash equivalents were $71.1 million, declining from $87.1 million as of Jun 30, 2017.

Share Repurchase Activity

During the quarter, Macerich repurchased and retired 742,017 shares at an average price of $53.42.

Dividend Hike

On Oct 24, 2017, Macerich announced its quarterly cash dividend of 74 cents per share, reflecting a hike of 4.2% from the prior payout. The dividend will be paid on Dec 1, 2017 to shareholders on record as of Nov 10.

2017 Guidance

Macerich has reaffirmed its guidance for 2017. The retail REIT expects FFO per share in the range of $3.90-$4.00. Currently, the Zacks Consensus Estimate for FFO is $3.96 per share.

Our Viewpoint

Increasing consumer purchases through the Internet have become a pressing concern for retail REITs, including Macerich. Also, concentration risk arising from the company’s significant positions in California, New York and Arizona may weigh on its earnings in times of economic uncertainty. Nevertheless, Macerich enjoys a premium portfolio and a presence of well-capitalized tenants in its roster.

Macerich’s shares have lost nearly 21.4% year to date compared with an 8.6% decline for the industry it belongs to.

We now look forward to the earnings releases of Hospitality Properties Trust HPT, Global Net Lease, Inc. GNL and Apple Hospitality REIT, Inc. APLE, which are expected next week.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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